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SARFAESI, 2002 - Enforcement of Security Interest in Manipur

SARFAESI

SECURITISATION AND RECONSTRUCTION OF FINANCIAL

ASSESTS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002

(54 OF 2002)

CHAPTER III

ENFORCEMENT OF SECURITY INTEREST

13. Enforcement of security interest

(1) Notwithstanding anything contained in
section 69 or section 69A of the Transfer of Property Act, 1882 (4 of
1882), any security interest created in favour of any secured creditor
may be enforced, without the intervention of court or tribunal, by such
creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a
liability to a secured creditor under a security agreement, makes any
default in repayment of secured debt or any instalment thereof, and his
account in respect of such debt is classified by the secured creditor as
non-performing asset, then, the secured creditor may require the
borrower by notice in writing to discharge in full his liabilities to
the secured creditor within sixty days from the date of notice failing
which the secured creditor shall be entitled to exercise all or any of
the rights under subsection (4).

(3) The notice referred to in sub-section
(2) shall give details of the amount payable by the borrower and the
secured assets intended to be enforced by the secured creditor in the
event of non-payment of secured debts by the borrower.

(3A) If, on receipt of the notice under
sub-section (2), the borrower makes any representation or raises any
objection, the secured creditor shall consider such representation or
objection and if the secured creditor comes to the conclusion that such
representation or objection is not acceptable or tenable, he shall
communicate within one week of receipt of such representation or
objection the reasons for non-acceptance of the representation or
objection to the borrower: PROVIDED that the reasons so communicated
or the likely action of the secured creditor at the stage of
communication of reasons shall not confer any right upon the borrower to
prefer an application to the Debts Recovery Tribunal under section 17
or the Court of District Judge under section 17A.

(4) In case the borrower fails to
discharge his liability in full within the period specified in
sub-section (2), the secured creditor may take recourse to one or more
of the following measures to recover his secured debt, namely:–

(a) take possession of the secured assets
of the borrower including the right to transfer by way of lease,
assignment or sale for realising the secured asset;

(b) take over the management of the
business of the borrower including the right to transfer by way of
lease, assignment or sale for realising the secured asset:

PROVIDED that the right to transfer by
way of lease, assignment or sale shall be exercised only where the
substantial part of the business of the borrower is held as security for
the debt:

PROVIDED FURTHER that where the
management of whole of the business or part of the business is
severable, the secured creditor shall take over the management of such
business of the borrower which is relatable to the security for the
debt.

(c) appoint any person (hereafter
referred to as the manager), to manage the secured assets the possession
of which has been taken over by the secured creditor;

(d) require at any time by notice in
writing, any person who has acquired any of the secured assets from the
borrower and from whom any money is due or may become due to the
borrower, to pay the secured creditor, so much of the money as is
sufficient to pay the secured debt.

(5) Any payment made by any person
referred to in clause (d) of sub-section (4) to the secured creditor
shall give such person a valid discharge as if he has made payment to
the borrower.

(6) Any transfer of secured asset after
taking possession thereof or take over of management under sub-section
(4), by the secured creditor or by the manager on behalf of the secured
creditor shall vest in the transferee all rights in, or in relation to,
the secured asset transferred as if the transfer had been made by the
owner of such secured asset.

(7) Where any action has been taken
against a borrower under the provisions of sub-section (4), all costs,
charges and expenses which, in the opinion of the secured creditor, have
been properly incurred by him or any expenses incidental thereto, shall
be recoverable from the borrower and the money which is received by the
secured creditor shall, in the absence of any contract to the contrary,
be held by him in trust, to be applied, firstly, in payment of such
costs, charges and expenses and secondly, in discharge of the dues of
the secured creditor and the residue of the money so received shall be
paid to the person entitled thereto in accordance with his rights and
interests.

(8) If the dues of the secured creditor
together with all costs, charges and expenses incurred by him are
tendered to the secured creditor at any time before the date fixed for
sale or transfer, the secured asset shall not be sold or transferred by
the secured creditor, and no further step shall be taken by him for
transfer or sale of that secured asset.

(9) In the case of financing of a
financial asset by more than one secured creditors or joint financing of
a financial asset by secured creditors, no secured creditor shall be
entitled to exercise any or all of the rights conferred on him under or
pursuant to sub-section (4) unless exercise of such right is agreed upon
by the secured creditors representing not less than three-fourth in
value of the amount outstanding as on a record date and such action
shall be binding on all the secured creditors: PROVIDED that in the case of a company in
liquidation, the amount realised from the sale of secured assets shall
be distributed in accordance with the provisions of section 529A of the
Companies Act, 1956 (1 of 1956): PROVIDED FURTHER that in the case of a
company being wound up on or after the commencement of this Act, the
secured creditor of such company, who opts to realise his security
instead of relinquishing his security and proving his debt under proviso
to sub-section (1) of section 529 of the Companies Act, 1956 (1 of
1956), may retain the sale proceeds of his secured assets after
depositing the workmen’s dues with the liquidator in accordance with the
provisions of section 529A of that Act: PROVIDED ALSO that the liquidator
referred to in the second proviso shall intimate the secured creditors
the workmen’s dues in accordance with the provisions of section 529A of
the Companies Act, 1956 (1 of 1956) and in case such workmen’s dues
cannot be ascertained, the liquidator shall intimate the estimated
amount of workmen’s dues under that section to the secured creditor and
in such case the secured creditor may retain the sale proceeds of the
secured assets after depositing the amount of such estimated dues with
the liquidator: PROVIDED ALSO that in case the secured
creditor deposits the estimated amount of workmen’s dues, such creditor
shall be liable to pay the balance of the workmen’s dues or entitled to
receive the excess amount, if any, deposited by the secured creditor
with the liquidator: PROVIDED ALSO that the secured creditor
shall furnish an undertaking to the liquidator to pay the balance of the
workmen’s dues, if any.

Explanation: For the purposes of this sub-section –

(a) “record date” means the date agreed
upon by the secured creditors representing not less than three-fourth in
value of the amount outstanding on such date;

(b) “amount outstanding” shall include
principal, interest and any other dues payable by the borrower to the
secured creditor in respect of secured asset as per the books of account
of the secured creditor.

(10) Where dues of the secured creditor
are not fully satisfied with the sale proceeds of the secured assets,
the secured creditor may file an application in the form and manner as
may be prescribed to the Debts Recovery Tribunal having jurisdiction or a
competent court, as the case may be, for recovery of the balance amount
from the borrower.

(11)
Without prejudice to the rights
conferred on the secured creditor under or by this section, the secured
creditor shall be entitled to proceed against the guarantors or sell the
pledged assets without first taking any of the measures specified in
clauses (a) to (d) of sub-section (4) in relation to the secured assets
under this Act.

(12) The rights of a secured creditor
under this Act may be exercised by one or more of his officers
authorised in this behalf in such manner as may be prescribed.

(13) No borrower shall, after receipt of
notice referred to in sub-section (2), transfer by way of sale, lease or
otherwise (other than in the ordinary course of his business) any of
his secured assets referred to in the notice, without prior written
consent of the secured creditor.